Punjab-Haryana High Court
M/S Punjab Chemical Industries vs District Magistrate-Cum-Deputy ... on 12 August, 2014
Author: Hemant Gupta
Bench: Hemant Gupta
CWP No. 15921 of 2014 (O&M) [1]
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
CWP No. 15921 of 2014
Date of decision: 12.8.2014
M/s Punjab Chemical Industries ....Petitioner
Versus
District Magistrate-cum-Deputy Commissioner, Ludhiana and others
.....Respondents
CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA
HON'BLE MR. JUSTICE KULDIP SINGH
Present: Shri Vipul Aggarwal, Advocate, for the petitioner
1. Whether Reporters of local papers may be allowed to see the judgments?
2. To be referred to the Reporters or not?
3. Whether the judgment should be reported in the Digest?
HEMANT GUPTA, J.
Challenge in the present petition is to an order dated 6.11.2013 (Annexure P.5) passed by the District Magistrate, under Section 14 of the Securitization & Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
It is pointed out that originally one Sadhu Singh Mangat was the owner of the premises known as Aman House measuring 384 Sq. yards. The same was leased out to the petitioner vide lease deed dated 15.8.1992. After the death of said Sadhu Singh, his son Jagjit Singh Mangat, respondent No.3 continued receiving the rent. It is further pointed out that DALBIR SINGH 2014.08.14 16:56 I attest to the accuracy of this document High Court Chandigarh CWP No. 15921 of 2014 (O&M) [2] said Jagjit Singh Mangat raised a loan of Rs.3 crores from respondent No.2- Allahabad Bank, by mortgaging the property in question. In default of payment of the aforesaid loan, respondent No.2 initiated proceedings under the Act. Thereafter, on an application filed by respondent No.2 under Section 14 of the Act, the District Magistrate passed the order on 6.11.2013. The said order is the subject matter of challenge in the present writ petition.
The petitioner has an alternative remedy of approaching the Debts Recovery Tribunal against the order passed by the District Magistrate in terms of Section 17(1) of the Act. In Kanaiyalal Lalchand Sachdev Vs. State of Maharashtra, (2011) 2 SCC 782, the Court held that against an action taken under Section 14, the remedy lies to move an application to the Tribunal. The Court observed:-
"22. We are in respectful agreement with the above enunciation of law on the point. It is manifest that an action under Section 14 of the Act constitutes an action taken after the stage of Section 13(4), and therefore, the same would fall within the ambit of Section 17(1) of the Act. Thus, the Act itself contemplates an efficacious remedy for the borrower or any person affected by an action under Section 13(4) of the Act, by providing for an appeal before the DRT.
23. In our opinion, therefore, the High Court rightly dismissed the petition on the ground that an efficacious remedy was available to the appellants under Section 17 of the Act. It is well settled that ordinarily relief under Articles 226/227 of the Constitution of India is not available if an efficacious alternative remedy is available to any aggrieved person."
Earlier in United Bank of India v. Satyawati Tondon, (2010) 8 SCC 110, the Supreme Court held that the expression "any person" in Section 17 would include borrowers, guarantors or any other person. It observed as under:-
DALBIR SINGH 2014.08.14 16:56 I attest to the accuracy of this document High Court Chandigarh CWP No. 15921 of 2014 (O&M) [3] "42. There is another reason why the impugned order should be set aside. If Respondent 1 had any tangible grievance against the notice issued under Section 13(4) or action taken under Section 14, then she could have availed remedy by filing an application under Section 17(1). The expression "any person"
used in Section 17(1) is of wide import. It takes within its fold, not only the borrower but also the guarantor or any other person who may be affected by the action taken under Section 13(4) or Section
14. Both, the Tribunal and the Appellate Tribunal are empowered to pass interim orders under Sections 17 and 18 and are required to decide the matters within a fixed time schedule. It is thus evident that the remedies available to an aggrieved person under the SARFAESI Act are both expeditious and effective."
In another case reported as Jagdish Singh v. Heeralal, (2014) 1 SCC 479, the Supreme Court held that the Jurisdiction of Civil Court is barred in respect of an action under Section 13(4) of the Act, the remedy being only under Section 17 of the Act. It observed as under:-
"24. Statutory interest is being created in favour of the secured creditor on the secured assets and when the secured creditor proposes to proceed against the secured assets, sub-section (4) of Section 13 envisages various measures to secure the borrower's debt. One of the measures provided by the statute is to take possession of secured assets of the borrowers, including the right to transfer by way of lease, assignment or realising the secured assets. Any person aggrieved by any of the "measures" referred to in sub-section (4) of Section 13 has got a statutory right of appeal to the DRT under Section 17. The opening portion of Section 34 clearly states that no civil court shall have the jurisdiction to entertain any suit or proceeding "in respect of any matter" which a DRT or an Appellate Tribunal is empowered by or under the Securitisation Act to determine. The expression "in respect of any matter" referred to in Section 34 would take in the "measures"
provided under sub-section (4) of Section 13 of the Securitisation Act. Consequently, if any aggrieved person has got any grievance against any "measures" taken by the borrower under sub-section (4) of Section 13, the remedy open to him is to approach the DRT or the DALBIR SINGH 2014.08.14 16:56 I attest to the accuracy of this document High Court Chandigarh CWP No. 15921 of 2014 (O&M) [4] Appellate Tribunal and not the civil court. The civil court in such circumstances has no jurisdiction to entertain any suit or proceedings in respect of those matters which fall under sub-section (4) of Section 13 of the Securitisation Act because those matters fell within the jurisdiction of the DRT and the Appellate Tribunal. Further, Section 35 says, the Securitisation Act overrides other laws, if they are inconsistent with the provisions of that Act, which takes in Section 9 CPC as well.
25. We are of the view that the civil court jurisdiction is completely barred, so far as the "measures" taken by a secured creditor under sub- section (4) of Section 13 of the Securitisation Act, against which an aggrieved person has a right of appeal before the DRT or the Appellate Tribunal, to determine as to whether there has been any illegality in the "measures" taken. The Bank, in the instant case, has proceeded only against secured assets of the borrowers on which no rights of Respondents 6 to 8 (sic Respondents 1 to 5) have been crystallised, before creating security interest in respect of the secured assets.
26. In such circumstances, we are of the view that the High Court was in error in holding that only civil court has the jurisdiction to examine as to whether the "measures" taken by the secured creditor under sub-section (4) of Section 13 of the Securitisation Act were legal or not. In such circumstances, the appeal is allowed and the judgment [Heeralal Kulmi v. Govind Kulmi, First Appeal No. 130 of 2008, order dated 5.8.2010 (MP) ] of the of the High Court is set aside. There shall be no order as to costs."
A Full Bench of the Delhi High Court in Amish Jain v. ICICI Bank Ltd. (Delhi) (F.B.), 2013(2) RCR (Civil) 252, has held that the borrower has a right to file an appeal even if the Bank has filed an application under Section 14 of the Act even when the possession and management has not been taken over by the Bank. The Court observed as under:-
"18. Further, the relief to be granted by the DRT in an appeal under Section 17(1) of the SARFAESI Act, if successful, is (under Section 17(3) of restoration of possession/management of the DALBIR SINGH 2014.08.14 16:56 I attest to the accuracy of this document High Court Chandigarh CWP No. 15921 of 2014 (O&M) [5] secured asset to the borrower and to pass such order as it may consider appropriate and necessary in relation to the recourse taken by the Banks/Financial Institution under sub-section (4) of Section 13 of the SARFAESI Act. This relief also, we find, the DRT within whose jurisdiction the secured asset to be so restored to the borrower is situated, to be the most competent to grant and implement. The orders which the DRT under Section 17(3) of the SARFAESI Act may be required to pass may also entail exercising jurisdiction over the CMM/DM which is approached by the Bank/Financial Institution for assistance for taking over possession/management. Notice in this regard may be taken of Kanaiyalal Lalchand Sachdev v. State of Maharashtra, 2011(2) RCR (Civil) 676 and of United Bank of India v. Satyawati Tandon, 2010(3) RCR (Civil) 963, suggesting that appeal under Section 17(1) can be filed after the Bank has filed application under Section 14, even if possession/management has not been taken. In such situation, DRT may be required to issue direction to the CMM/DM approached by the Bank/Financial Institution.........."
The action under Section 14 by the District Magistrate is to give effect to the action of the Bank to take possession of the secured asset. The order of the District Magistrate is to aid the effort of the Bank to realize secured assets. It has no independent existence but an order analogous to execution proceedings. Therefore, in terms of the judgments referred to above, the order of District Magistrate would be appealable before the Debt Recovery Tribunal.
It may be noticed that recently the Hon'ble Supreme Court in Harshad Govardhan Sondagar v. International Assets Reconstruction, 2014(6) SCC Page 1 has observed that the remedy under Section 17 of the Act, is not available to a lessee in the case of his dispossession by the secured creditor. The lessee has a liberty to challenge the order passed by the District Magistrate in accordance with power conferred under Article DALBIR SINGH 2014.08.14 16:56 I attest to the accuracy of this document High Court Chandigarh CWP No. 15921 of 2014 (O&M) [6] 226 of the Constitution before the High Court. However, the judgments in three quoted reports were not brought to the notice of the Court. The Court observed as:-
"32. When we read sub-section (1) of Section 17 of the SARFAESI Act, we find that under the said sub-section "any person (including borrower)", aggrieved by any of the measures referred to in sub- section (4) of Section 13 taken by the secured creditor or his authorised officer under the chapter, may apply to the Debts Recovery Tribunal having jurisdiction in the matter within 45 days from the date on which such measures had been taken. We agree with Mr Vikas Singh that the words "any person" are wide enough to include a lessee also. It is also possible to take a view that within 45 days from the date on which a possession notice is delivered or affixed or published under sub-rules (1) and (2) of Rule 8 of the Security Interest (Enforcement) Rules, 2002, a lessee may file an application before the Debts Recovery Tribunal having jurisdiction in the matter for restoration of possession in case he is dispossessed of the secured asset. But when we read sub-section (3) of Section 17 of the SARFAESI Act, we find that the Debts Recovery Tribunal has powers to restore possession of the secured asset to the borrower only and not to any person such as a lessee. Hence, even if the Debts Recovery Tribunal comes to the conclusion that any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor are not in accordance with the provisions of the Act, it cannot restore possession of the secured asset to the lessee. Where, therefore, the Debts Recovery Tribunal considers the application of the lessee and comes to the conclusion that the lease in favour of the lessee was made prior to the creation of mortgage or the lease though made after the creation of mortgage is in accordance with the requirements of Section 65-A of the Transfer of Property Act and the lease was valid and binding on the mortgagee and the lease is yet to be determined, the Debts Recovery Tribunal will not have the power to restore possession of the secured asset to the lessee. In our considered opinion, therefore, there is no remedy available under Section 17 of the SARFAESI Act to the lessee to protect his lawful possession under a valid lease."
DALBIR SINGH 2014.08.14 16:56 I attest to the accuracy of this document High Court Chandigarh CWP No. 15921 of 2014 (O&M) [7] Thus, there is apparent conflict between the Coordinate Benches of the Hon'ble Supreme Court. A Full Bench of this Court in M/s Indo Swiss Time Limited Dundahera v. Umrao and others, 1981 PLR 335, has examined the issue as to which of the contradictory judgments passed by the coordinate Bench of the Superior Court, is to be followed. It was held that the High Court must follow the judgment which appears to it to lay down the law more elaborately and accurately. The Court held as under:-
"23. ...............When judgments of the Superior Court are of co-equal Benches and therefore of matching authority then their weight inevitably must be considered by the rationale and the logic thereof and not by the mere fortuitous circumstances of the time and date on which they were rendered. It is manifest that when two directly conflicting judgments of the superior Courts and of equal authority are extent then both of them cannot be binding on the Courts below. Inevitably a choice though a difficult one, has to be made in such a situation. On principle it appears to me that the High Court must follow the judgment which appears to it to lay down the law more elaborately and accurately. The mere incidence of time whether the judgments of co-equal Benches of the Superior Court are earlier or later is a consideration which appears to me as hardly relevant."
After hearing learned counsel for the petitioner, we find that the petitioner has an effective alternative remedy to approach the Debts Recovery Tribunal, under Section 17 of the Act, in terms of the judgments referred to above.
In view of the contradictory judgments of the Coordinate Benches of the Hon'ble Supreme Court, we are more inclined to follow the earlier judgments of the Hon'ble Supreme Court, which provide a remedy to the borrower/lessee against an action of the District Magistrate under Section 14 of the Act. Such course provides a remedy to the lessee including the DALBIR SINGH 2014.08.14 16:56 I attest to the accuracy of this document High Court Chandigarh CWP No. 15921 of 2014 (O&M) [8] borrower, whereas in the absence of such course, the remedy would be to approach this Court, wherein it will not be appropriate to decide the questions of fact and/or mixed questions of law and facts. It would also lead to confusion amongst the borrowers and/or the lease as to which forum they should invoke. It would be in interest of justice that all actions of the secured creditors or of the District Magistrate are firstly challenged under Section 17 of the Act before the Tribunal.
In view thereof, we do not find any merit in the present petition. The same is accordingly dismissed. However, the petitioner would be at liberty to avail the remedy under Section 17 of the Act, in accordance with law.
(HEMANT GUPTA) JUDGE (KULDIP SINGH) JUDGE August 12, 2014 ds DALBIR SINGH 2014.08.14 16:56 I attest to the accuracy of this document High Court Chandigarh